EUR/USD remained stable during the Asian session on Monday, trading around 1.0430, following gains from the previous day. This uptick can be attributed to a pullback in the US Dollar (USD) after the release of the US Personal Consumption Expenditures (PCE) Price Index data, which showed signs of easing inflation.
The November inflation report revealed that core PCE inflation year-over-year, the Federal Reserve’s (Fed) preferred measure, rose by 2.8%, slightly below the expected 2.9%. On a monthly basis, core inflation increased by 0.1%, falling short of the 0.2% forecast and the previous month’s 0.3% rise.
This moderate inflation growth is likely to encourage the Fed to adopt a slower pace of rate cuts in 2025. According to the CME FedWatch tool, markets are now pricing in a more than 90% chance that the Fed will keep interest rates unchanged in January, maintaining the current range of 4.25%–4.50%.
Eurozone Developments Support the Euro
Meanwhile, in the Eurozone, the European Central Bank (ECB) continues to chart a path toward easing monetary policy. ECB Governing Council member Boris Vujcic confirmed on Saturday that the central bank intends to lower borrowing costs further in 2025, continuing the trend from 2024.
Additionally, positive economic developments in Germany, the largest economy in the Eurozone, are providing support for the Euro. The approval of taxation reforms by German lawmakers is expected to boost disposable income for households, thereby stimulating consumer demand and supporting overall economic growth.
These developments, along with the US inflation data, are helping to sustain the Euro’s strength against the US Dollar.
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